Genetics may influence financial risk-taking

Research recently published in PLOS ONE suggests that genetics may be a primary factor in shaping individuals’ financial decisions. In the paper, Brian Knutson, PhD, associate professor of psychology at Stanford, and colleagues examined how a serotonin gene, known as 5-HTTLPR, influenced participants’ willingness to take risks when investing their money.

As explained in a Stanford Reportarticle published today, we all have two copies, known as alleles, of the 5-HTTLPR gene. Individual combinations can include two short, two long or one short and one long allele. Researchers found that those with two short alleles displayed more neurotic traits and were more risk adverse. Paul Gabrielsen writes:

The researchers asked 60 volunteers from the Bay Area to divvy up $10,000 among three investment options: stocks, bonds or cash. On average, study participants with two short 5-HTTLPR alleles kept 24 percent more of that money in cash than did the two-long-allele carriers, who put more money in stocks.

Knutson and his colleagues had previously measured participants’ financial literacy, cognition and income level, but those factors didn’t explain the variation in investment strategy. Could the gene explain the variation?

“We found that it did,” Knutson said.

Given neurotic participants’ propensity to avoid risk, [Kellogg School of Management professor Camelia Kuhnen, PhD,] hypothesized that they would react just as strongly to a negative outcome. In unpublished research, Kuhnen watched how participants’ brains reacted during a game in which they learned, by trial-and-error, which of two options carried greater financial risk. Short-allele carriers displayed heightened anxiety before making a decision, but reacted no differently than long-allele carriers when they saw a negative outcome.

“The difference between these people is not about how they react to outcomes,” Kuhnen said. “It’s about how, before the choice, they think about the decision.”

The findings, says Knutson, can help in understanding how emotions affect decision making. “You’re not a slave to your genotype,” he notes in the story “If you understand how it’s influencing your behavior, then you have a shot at changing that behavior.”